As artificial intelligence becomes more prevalent in current world affairs, new patterns concerning its research and development strategies are also emerging. Traditionally, academia has focused on basic research and education, while industry concentrated on applied research and commercialization. However, in recent years, the commercial sector’s dominance in AI investment and research has raised concerns about the balance of power. The shift of researchers from academia to industry has also raised questions.
Advanced AI systems increasingly require large amounts of data, compute power, and funding resources that industry actors possess in greater quantities than academia and nonprofits. Hence, AI research, which was originally the domain of academia in the early 2000s is now being taken over by industry.
We recently talked about this division in another article we published, 7 Most Popular AI Penny Stocks Under $5, here’s an excerpt from it:
“A recent study from Stanford University found that businesses train AI models faster than academic institutions. In 2023, the industry-trained AI neared 51 significant machine learning models, while academia managed only 15. This trend persisted in 2024 despite rising training costs. ChatGPT 4, the latest model of ChatGPT, cost about $80 million to train. Google’s Gemini Ultra cost around $191 million.”
A 2021 Stanford report says that the reason behind the blurring roles of academia and industry is that businesses come with affordable cloud computing, open-source libraries, and pre-trained models that incentivize university researchers to pursue commercial applications of their work. More and more industry papers are now appearing at conferences, raising concerns about applied research stifling long-term innovation or being biased toward corporate interests, all while also accelerating solutions for real-world problems.
A 2023 paper in the journal Science states that businesses attract 70% of the top talent with PhDs in AI today, as compared to just 20% 2 decades ago. The number of AI research faculty in academia has stagnated, while industry hiring has surged 8 times since 2006. Industry models being substantially larger (about 29 times), indicating superior computing power, is a huge reason behind this.
In 2021, US government agencies allocated a total of $1.5 billion for academic AI research, while Google spent the same amount on a single project in just one year.
The largest AI models are now developed in industry 96% of the time. Leading benchmarks are also primarily industry-driven, accounting for 91% of the total. Furthermore, the number of published papers with industry co-authors has nearly doubled since 2000.
Yet, there’s another anticipated shift as academic researchers are increasingly able to deploy their inventions in real-world settings. Duolingo, a language learning app developed by academics, is a successful example.
A distinguished MIT professor, Frédo Durand, believes academia can still be a driving force for innovation. He says that 25 years ago, the field of computer graphics in academia faced a similar resource imbalance where the industry created stunning visuals that academia couldn’t match. However, instead of trying to mimic industry, academia took a different path and focused on ideas like advanced lighting simulations, fluid dynamics, and machine learning for animation. These seemingly outlandish ideas eventually became the foundation of modern rendering and graphics hardware.
Durand believes this approach holds valuable lessons for AI research. He emphasizes the importance of academia pursuing unconventional approaches, openly sharing their work, and maintaining a sense of excitement about the field.
However, he recognizes the challenges for academia and suggests potential solutions including increased government funding for academic research, shared research infrastructure, and strategies to keep top AI talent within academia. While industry seems to be taking over AI in general, collaborative partnerships with academia could yield better results. In one way or the other, AI will remain a hot topic in the coming times.
Methodology
To compile our list, we sifted through several active subreddits to compile a list of 15 AI stocks to buy. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. BigBear.ai Holdings, Inc. (NYSE:BBAI)
Number of Hedge Fund Holders: 9
BigBear.ai Holdings, Inc. (NYSE:BBAI) uses AI solutions to help businesses make better, data-driven decisions, specializing in areas like supply chain management, cybersecurity, and national security. The company aims to simplify AI adoption in edge networks by 2025, allowing customers to deploy AI closer to IoT devices. It was held by 9 hedge funds at the close of Q2 2024.
The company relies heavily on just 3 customers (49% of 2023 revenue). These long-term contracts (5+ years) expire between 2024-2026, and renewal is not guaranteed. Revenue growth could stall if it fails to expand its customer base before then.
In Q2, the company partnered with Heathrow Airport to develop advanced technologies to improve security and overall operations. It also acquired a new $7.7 million, 7-month contract with the US Army, and an $8.5 million, 6-month extension to continue another project, solidifying the company’s role as a prime contractor for the US Army.
In July, BigBear.ai Holdings, Inc.’s (NYSE:BBAI) Troy™, an AI-driven workflow engine designed to accelerate the process of binary reverse engineering in cybersecurity achieved “Awardable” status and is now available for procurement on the Chief Digital and Artificial Intelligence Office’s (CDAO) Tradewinds Solutions. It is one of the 6 largest products of the company.
The company is positioned for growth as it continues integrating AI in all of its businesses and remains dominant in the defense space. Management sees its target market tripling by 2028 (from $80 billion to $272 billion) due to AI adoption in security, supply chain, and digital identity. Despite being in its early growth stages, this is one of the best AI stocks under $50 to buy right now.
9. C3.ai Inc. (NYSE:AI)
Number of Hedge Fund Holders: 18
C3.ai Inc. (NYSE:AI) helps businesses use AI to solve real-world problems by building tools for challenges in areas like supply chain management. These challenges look like fraud detection in finance and predictive maintenance in manufacturing. Its GenAI products are deployed across 15 industries and had 50,000+ inquiries in FQ4.
The company closed 47 agreements, including 34 new pilots, and continued to diversify across industries in this quarter. It entered into new agreements with ExxonMobil, A.P. Moller-Maersk, General Mills, Quest Diagnostics, Flextronics, BASF Petronas, Worley Limited, Thales Group, the U.S. Navy, the U.S. Intelligence Community, the U.S. National Science Foundation, The Secil Group, Cargill, Nucor Corporation, and Dow, among others.
The company recorded a 20% year-over-year growth in FQ4 2024 and was held by 18 hedge funds by the end of this quarter. The largest shareholder was Citadel Investment Group, with a position of $85,964,864.
C3.ai Inc. (NYSE:AI) was recognized by Constellation Research as a leader in AI and ML platforms. Its platform was included in the ShortList for both Best-of-Breed and Cloud categories, acknowledging its capability for building and running large-scale Enterprise AI applications.
C3.ai Inc. (NYSE:AI) is a leading player in enterprise AI with a head start in the market (90+ applications). It sees AI value transitioning from hardware to software, positioning the company well for long-term growth. Analysts and hedge funds view it as a top AI stock due to its strong market position and successful execution.
Bireme Capital stated the following regarding C3.ai, Inc. (NYSE:AI) in its fourth quarter 2023 investor letter:
“Our final new short position is in a company called C3.ai, Inc. (NYSE:AI). Originally named “C3 Energy,” C3.ai has changed its name multiple times based on whatever hot new trend they were supposedly capitalizing on. The “energy” theme was about smart grid and cap-and-trade. Then the firm changed its name to “C3 IoT” to attempt to capitalize on the Internet of Things buzz. After that trend fizzled out, the moniker was altered once more, with the company capturing the “AI” ticker in December 2020 – a savvy move if it wants to sell stock to credulous investors, but irrelevant to its business prospects. As Kerrisdale put it, the company is a “minor, cash burning consulting and services business masquerading as a software company.”
8. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 44
Palantir Technologies Inc. (NYSE:PLTR) helps organizations use AI to make better, data-driven decisions. It builds software that can understand, visualize, and analyze large amounts of complex data. The company’s stock is held by 44 hedge funds, as of June 30. The largest shareholder is Renaissance Technologies, with a position worth $1,000,922,777.
In its 27% year-over-year improvement for Q2 2024, US commercial revenue was a big contributor. The sector alone rose 70% year-over-year, coming from existing customers signing expansion deals. US government business grew around 8% in Q1 and Q2 together. At this time there was a production contract from the Department of Defense to deploy an AI-enabled operating system, with an initial order of $153 million.
In August, it partnered with Wendy’s to use AI for supply chain optimization. It also partnered with Microsoft to bring AI to US national security. The companies will integrate Microsoft’s Azure OpenAI Service into Palantir’s AI Platform, allowing for AI adoption and innovation for national security missions. Towards the end of the month, it also partnered with Sompo, a Brazilian insurer.
Palantir Technologies Inc. (NYSE:PLTR) is a leading AI company with strong positions in infrastructure and oncology. With the GenAI market expected to reach $1.3 trillion by 2032, its growing government and commercial businesses make it a promising AI investment. The company’s focus on digital transformation and market share gains positions it well for growth.
Carillon Scout Mid Cap Fund stated the following regarding Palantir Technologies Inc. (NYSE:PLTR) in its first quarter 2024 investor letter:
“The top contributor to return for the quarter was Palantir Technologies Inc. (NYSE:PLTR). Sentiment improved on Palantir after it reported stronger than expected commercial customer revenue and free cash flow. U.S. commercial growth was especially encouraging, as U.S. commercial revenue was up by a large percentage year over year for the fourth quarter and U.S. commercial customer count grew nearly as much. We expect Palantir to become one of the premier artificial intelligence (AI) software providers, built on its Foundry and AIP platforms.”
7. ASML Holding NV (AMS:ASML)
Number of Hedge Fund Holders: 81
ASML Holding NV (AMS:ASML) makes and sells advanced semiconductor equipment systems. Its machines are used to create the intricate patterns on silicon wafers that form the foundation of modern electronics, producing the chips that power everything from smartphones to computers and cars. It has developed a new EUV scanner that enables customers to create custom High NA EUV use cases. This breakthrough machine can produce some of the smallest chips currently available.
Driven by AI-related demand for both Logic and Memory and improvements in inventory levels, the company recorded a $6.83 billion revenue for Q2 2024. However, there was a year-over-year decline of 11.69%.
The primary reason for the decline was geopolitical tensions. A recent Bloomberg report sparked investor concerns about potential US restrictions on chip equipment exports to China. This could significantly impact ASML’s business, as China is a major customer, especially for older-generation chipmaking tools.
The company’s stock price fell 10% due to the uncertainty surrounding potential US restrictions on chip equipment exports to China. A recent Bloomberg report sparked investor concerns regarding this situation as China is a major customer, especially for older-generation chipmaking tools. Still, by the end of this quarter, 81 hedge funds were long in the company, with the largest stake amounting to $3,226,042,315 by Fisher Asset Management.
Recently, Dutch Prime Minister Dick Schoof said that the government will consider the economic interests of ASML Holding NV (AMS:ASML) when deciding on further tightening the rules governing the export of its computer chip-making equipment to China.
Despite the stock price drop under these circumstances, the company maintains its 2024 “transition year” outlook, anticipating a recovery in 2025. It remains optimistic about the strong growth potential in AI, which is driving demand for its advanced EUV equipment.
Polen International Growth Strategy stated the following regarding ASML Holding N.V. (NASDAQ:ASML) in its fourth quarter 2023 investor letter:
“Netherlands-based ASML Holding N.V. (NASDAQ:ASML) and Japan-based Lasertec play dominant roles within different segments of the global semiconductor industry. In both cases, shares rallied significantly in the fourth quarter of 2023, prompting our positions to grow as a percentage of the overall portfolio. We believe both companies will see demand for their products as extreme ultraviolet (EUV) lithography and soon high-numerical aperture lithography must be utilized to manufacture the world’s smallest chips. However, in our estimation, 2024 could deliver a year of less exciting growth for the semiconductor industry, which prompted us to trim these positions back.”
6. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 108
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a major semiconductor company that designs and manufactures microprocessors, graphics processing units (GPUs), and other computing components, and is known for its competitive products in the gaming and high-performance computing markets.
Advanced Micro Devices, Inc (NASDAQ:AMD) impressed Wall Street with Q2 results, where the data center revenue in the period grew 49% year over year. Overall revenue growth was 8.88% for the quarter, recording a total revenue of $5.84 billion. This was $113.81 million higher than estimates. Ryzen CPU sales increased 49% over the year. Gaming revenue declined 59% due to decreased PlayStation and Xbox sales, but Radeon 6000 GPUs saw a year-over-year sales increase.
The 2023 launch of its Instinct™ MI300 Series accelerators, designed for AI and HPC workloads, is still a major contributor to the company’s growth. This chip competes with Nvidia’s H100 AI chip. The company now plans on releasing new AI chips annually, including the MI325X by the end of 2024, the MI350 in 2025 (a competitor to Nvidia’s Blackwell), and the MI400 in 2026.
Dan Ives of Wedbush believes that the company’s strong results and AI investments suggest a promising future in the AI market. He expects it to benefit significantly from the growing AI spending, which is estimated to reach $1 trillion over the next few years. Investors seem to follow the same opinion, as 108 hedge funds held long positions in this company by June 30. Fisher Asset Management had the largest stake, valued at $3,755,355,818.
Meridian Contrarian Fund stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its fourth quarter 2023 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global semiconductor chip maker specializing in central processing units (CPUs), which are considered the core component of most computing devices, and graphics processing units (GPUs), which accelerate operations running on CPUs. We invested in 2018 when it was a mid-cap value stock plagued by many years of underperformance due to lagging technology and lost market hi share versus competitors Intel and Nvidia. Our research identified that changes and investments made by current management under CEO Lisa Su had, over several years, finally resulted in compelling technology that positioned AMD as a stronger competitor to Nvidia and that its latest products were superior to Intel’s. We invested on the the belief that AMD’s valuation at that that time did not reflect the potential for its technology leadership to generate significant market share gains and improved profits. This thesis has been playing out for several years. During the quarter, AMD unveiled more details about its upcoming GPU products for the AI market. The stock reacted positively to expectations that AMD’s GPU servers will be a viable alternative to Nvidia. Although we pared back our exposure to AMD into strength as part of our risk-management practice, we maintained a position in the stock. We believe AMD will continue to gain share in large and growing markets and is reasonably valued relative to the potential for significantly higher earnings.”
5. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 130
Broadcom Inc. (NASDAQ:AVGO) designs, develops, and manufactures a wide range of semiconductor components and integrated circuits, as well as software solutions, and is known for its expertise in wireless communications, broadband access, and enterprise storage. It is focused on cloud computing, data centers, networking, broadband, and wireless communications.
The company is exploring AI chip designs with famous tech giants. Its custom chip designs and networking semiconductors are integral to building AI systems. Stacy Rasgon, Bernstein’s semiconductor analyst, acknowledges the company’s strong AI potential, networking and computing power, and attractive valuation. He believes that despite challenges in the core business, its AI focus and strong financial performance make it a compelling investment.
Currently, 130 hedge funds have stakes worth $20.035 billion in Broadcom Inc. (NASDAQ:AVGO). Rajiv Jain’s GQG Partners is the company’s largest shareholder with $32.35 million shares worth $5.2 billion.
In the second quarter, Broadcom Inc. (NASDAQ:AVGO) saw its revenue from AI products hit a record $3.1 billion, which signals a 280% year-over-year growth. The total revenue growth was 42.99%, generating $12.49 billion in revenue. The earnings per share in this period were $1.10.
CEO, Hock Tan, projected that total AI sales for 2024 would exceed $11 billion. Management raised revenue guidance to over $51 billion for this year through strong growth, driven in part by the software revenue. Overall, the company’s Ethernet business is thriving. Partnerships with Arista Networks and other tech giants like Dell, Juniper, and Super Micro are driving growth. Additionally, Broadcom has collaborated with Google and Meta to develop ASIC AI chips. All of these actions position Broadcom Inc (NASDAQ:AVGO) for success.
Mar Vista Investment Partners, LLC stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“During the quarter, we established new investments in Broadcom Inc. (NASDAQ:AVGO) and Meta Platforms. We initiated a position in Broadcom in Q2. As a skilled aggregator, Broadcom acquires firms, streamlines their operations, and invests R&D dollars in mission critical products that generate industry leading profit margins, robust cash flows and high returns on invested capital. Its primary markets include AI accelerators targeting generative AI applications, networking & wireless semiconductors, and mission-critical infrastructure software solutions.
Broadcom is well-positioned to benefit from the rapidly expanding demand for custom AI accelerator chips that support the evolution of the generative AI market. The company is the second-largest producer of AI accelerator chips behind Nvidia and leads the market in custom AI ASIC chips. Its customers include leading hyper scalers like Alphabet and Meta who are turning to Broadcom for custom silicon due to its performance and cost advantages. We believe the company is a direct beneficiary of a multi-year capital cycle driven by hyper scalers building out next-generation AI factories.
Broadcom recently acquired VMware, the leader in virtualization software targeting the enterprise market. The integration of VMware is tracking ahead of plan as management has simplified its product bundles, transitioned to a subscription revenue model, and reduced operating costs. We believe this simplified go-to-market structure will result in strong top-line revenue growth and expanding operating margins. We believe Broadcom will compound intrinsic value per share in the mid-20% range over the intermediate term as it benefits from the AI-infrastructure build-out, a cyclical recovery in its legacy semiconductor business, and modestly accelerating growth from its infrastructure software business as VMware is successfully integrated.”
4. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 156
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest contract chip manufacturing company that manufactures chips for other companies. Its significant investments in chip fabrication and decades of expertise create a strong competitive advantage.
The quality and standards met at the company are so high that tech giants like Apple and NVIDIA rely on it to make chips for them. The company currently makes up 60% of the total chip manufacturing industry, and an even higher 90% of the advanced chip manufacturing (including 3-nanometer chips).
Second quarter revenue was $20.58 billion, representing a 33.30% year-over-year increase. This growth was supported by strong demand for industry-leading 3- (15% of wafer revenue), 7- (35% of wafer revenue), and 5-nanometer technologies (17% of wafer revenue), offset by the continued smartphone seasonality.
Advanced technology, defined as 7-nanometer and below, was the main contributor accounting for 67% of wafer revenue. The company’s high-performance computing platform (HPC) accounted for 52% of the total Q2 revenue for the first time.
Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) leadership in advanced processes will drive customer growth, stable production, and lower costs. This strong position is why it’s one of the best AI stocks according to Reddit. As of June 30, it is held by 156 hedge funds, with the largest stake valued at $4,937,464,673, held by Fisher Asset Management.
Ariel Global Fund stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q2 2024 investor letter:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) also traded sharply higher in the quarter, following its annual shareholder meeting where management highlighted robust earnings visibility. The boom in AI investment is driving significant demand for the semiconductor hardware that enables it. TSMC currently holds a dominant position in relevant chip manufacturing and packaging. Additionally, although AI investments have been mostly focused on the datacenter market, Apple’s recent announcement on “Apple Intelligence” kickstarted an Edge AI race—which will likely drive greater than expected semiconductor growth in smartphones. TSMC is Apple’s sole foundry partner which bodes well for the future. Overall, we continue to view TSMC’s scale, technology, business model, customer service and execution favorably. The fact the company remains committed to returning capital to shareholders through both buybacks and dividends is another plus.”
3. NVIDIA Corp. (NASDAQ:NVDA)
Number of Hedge Fund Holders: 179
NVIDIA Corp. (NASDAQ:NVDA) is a leading designer and manufacturer of graphics processing units (GPUs). These chips are essential for rendering graphics, but now they’re also used in artificial intelligence, machine learning, and data centers.
In FQ2 2025, the company recorded a rather higher year-over-year improvement of 122.40% in revenue. The revenue generated in this period was $30.04 billion, beating analyst estimates by $1.29 billion. Data center revenue was up 54% year-on-year, driven by strong demand for NVIDIA Hopper, GPU computing, and our networking platforms. Cloud service providers represented roughly 45% of data center revenue.
Despite such growth, the company’s shares fell following this report. This is because investors had concerns about Blackwell chip production and slowing data center growth. Still, its shares were held by 179 hedge funds. Fisher Asset Management is the biggest shareholder with shares worth $11.54 billion, as of June 30. Later in late August, management approved a buyback of $50 billion in equity shares.
NVIDIA Corp. (NASDAQ:NVDA) faces pressure to launch new products to maintain investor confidence. Factors like delays in Blackwell chip production and concerns about high GPU prices are what impact the demand. While CUDA software is a competitive advantage, the company’s future success depends on continued innovation and effective AI monetization. Market experts are also forecasting a shift to robotics for the company’s growth. Management expects AI revenue to reach low-double-digit billions this year.
Aoris International Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“If Information Technology was the dominant sector for the quarter, NVIDIA Corporation (NASDAQ:NVDA), which is the largest supplier of microprocessors used for generative AI applications, was the dominant company. NVIDIA’s share price rose by a third in the quarter and has increased by 255% so far this year. Since the beginning of 2023, its market value has risen by 8.3x, or $4.3 trillion, making NVIDIA the third largest company in the world by this measure.
As a result of the unusually strong stock price performance from NVIDIA and a few other large companies, equity markets have become increasingly concentrated. You can see this in the chart below, which shows that on 30 June, 27% of the market value of the 500 largest US companies was attributable to just five companies, more than twice the average of the last 20 years.
The composition of the Aoris International Fund will always be very different to that of the broader equity market. There will be periods, such as the most recent quarter, where this contributes to our performance lagging that of our benchmark. When it comes to NVIDIA and other AI-centric companies, rapid growth is exciting, but it makes it difficult for us to judge what is normal. Our preference is to own established leading companies where we can make a more confident, evidence-based judgement about their growth and profitability.”
2. Alphabet Inc (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 216
Alphabet Inc (NASDAQ:GOOGL), or simply Google, is a multinational technology company that specializes in Internet-related services and products, such as online advertising, search engines, cloud computing, hardware, and software. It operates through three main segments, Google Services, Google Cloud, and Other Bets.
It dominates the online search and advertising sector, fueled by its expertise in algorithms and AI, and has a 90% market share in search and over 2 billion users for its advertising products.
The company’s Pixel 9 phones, which have an on-device AI assistant Gemini Nano, are a highlight, but the US Justice Department’s potential breakup has pressured the company’s shares. 216 hedge funds were long in the company by the second quarter of 2024. Fisher Asset Management is the top shareholder in the company and has a position worth $8.856 billion.
Alphabet Inc (NASDAQ:GOOGL) will reach a $100 billion revenue run-rate from YouTube Ads and Google Cloud by the end of 2024. During the second quarter, Cloud revenue alone rose 28.8%. The overall revenue growth was 13.59%, with a revenue of $84.74 billion. Google now has about 91.06% share of the search engine market, just 1.65% lower than the December 2019 levels.
The company’s shares slipped recently following reports that OpenAI is working on a web search product called SearchGPT. Analysts believe Google is one of the cheapest AI stocks due to its potential in GenAI, making it a top AI stock according to Reddit.
It is investing heavily in GenAI, and CEO Sundar Pichai believes it’s improving user satisfaction and increasing search usage, especially among younger users. Google plans to spend $50 billion on AI initiatives by the end of 2024.
Patient Capital Management stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
1. Meta Platforms Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 219
Meta Platforms Inc. (NASDAQ:META), formerly known as Facebook, is a multinational technology conglomerate that focuses on social media and online services and engages in the development of products that enable people to connect worldwide.
Their most well-known platforms include Facebook, Instagram, WhatsApp, and Messenger, with over 3.2 billion users as of March. It monetizes through business users and AI-driven ad improvements and managed to grow twice as fast as Google in the ads space in Q2 2024, despite an increase in price per ad figures.
In the second quarter, the company saw a 7% increase in daily active users while achieving a remarkable 73% increase in earnings per share, and a 22.10% rise in revenue as compared to the prior year. This translated into a revenue of $39.07 billion. The revenue surge came from a 10% increase in both the number of ads served and the cost per ad. 219 hedge funds were long in Meta (NASDAQ:META) as of June 30. GQG Partners is the top investor with a stake worth $5.4 billion.
Meta Platforms Inc. (NASDAQ:META) has acquired nearly 600,000 of Nvidia’s H100 GPUs and is also developing its custom chip. It has introduced its own AI models, such as Llama, which is integrated into its apps and is available to external developers.
Its strong user base, AI expertise, and advanced advertising drive its growth. Through these strengths and a focus on innovation, it is well-positioned for future success. The company’s expansion into the metaverse, powered by AI and immersive technologies, creates new growth opportunities. Their AI-driven products, like Meta AI and Meta Smart Glasses, offer unique experiences to users.
Fred Alger Management stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q1 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META) operates the world’s largest social network, with over 3 billion monthly active users across its platform. The company generates revenue predominantly from advertising. which accounts for over 95% of its total revenue, evenly split between North America and international markets. During the quarter, shares contributed to performance following the release of strong fiscal fourth quarter operating results, with revenues and earnings surpassing analyst estimates. The better-than- expected revenues were attributed to strong advertiser demand and Al-driven ad improvements. Moreover, the company materially raised its fiscal first quarter sales and earnings guidance above analysts’ estimates, buoyed by continued strong advertiser demand trends and enhancements to Reels. Advantage+. Click-to-message, and Shop Ads. Further, management noted that ongoing investment in Al is enhancing user engagement and advertiser returns through improved targeting and measurement. Separately, Meta authorized a new share repurchase plan representing approximately 5% of its market capitalization and announced the initiation of its first dividend, implying an approximate 0.4% yield.”
As we acknowledge the growth potential of Meta Platforms Inc. (NASDAQ:META), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
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